Michael Wilson & Partners Limited v Nicholls & Ors [2011] HCATrans 142 (1 June 2011)

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Michael Wilson & Partners Limited v Nicholls & Ors [2011] HCATrans 142 (1 June 2011)

Last Updated: 1 June 2011

[2011] HCATrans 142

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S67 of 2011

B e t w e e n -

MICHAEL WILSON & PARTNERS LIMITED

Appellant

and

ROBERT COLIN NICHOLLS

First Respondent

DAVID ROSS SLATER

Second Respondent

TEMUJIN SERVICES LIMITED

Third Respondent

TEMUJIN INTERNATIONAL LIMITED

Fourth Respondent

TEMUJIN INTERNATIONAL FZE

Fifth Respondent

GUMMOW ACJ
HAYNE J
HEYDON J
CRENNAN J
BELL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 1 JUNE 2011, AT 10.21AM

(Continued from 31/5/11)

Copyright in the High Court of Australia

____________________

MR WALKER: Before my friend resumes, if I may, your Honours, we have given to your Honours’ associates the form of orders sought in answer to observations made by, in particular, Justice Gummow and Justice Heydon yesterday to me. In paragraph 2 of that document, we have sought to give, I think, exhaustively, the references in the Court of Appeal reasons that justify distinguishing between those grounds that have been dealt with and should not be revisited were it to go back to the Court of Appeal and those grounds that are still live largely because undetermined.

GUMMOW ACJ: Thank you. You have seen this, Mr Lindsay?

MR LINDSAY: Only shortly before coming to Court. Your Honours will see that we proffer an alternative form of draft with a slightly different approach and we would be inviting your Honours to allow us a couple of days to respond to each document. We certainly agree that there would not be an unconstrained rehearing before the Court of Appeal. It is just a matter of formulating the best way of dealing with it.

GUMMOW ACJ: Very well.

MR LINDSAY: May it please the Court, this morning the respondents seek to address all topics arising from yesterday’s proceedings and those four topics, I note now if I may, first of all in response to a question raised by Justice Heydon we have revisited the formulation of our written submissions on apprehended bias. Secondly, in response to a question from Justice Hayne, we have prepared a formulation of the respondents’ abuse of process case expressed in terms of Walton v Gardiner.

GUMMOW ACJ: Expressed in terms of?

MR LINDSAY: Walton v Gardiner.

GUMMOW ACJ: Right.

MR LINDSAY: Thirdly, we propose to say something about the equitable principle of satisfaction. Fourthly, there is the question raised by Justice Heydon about the form of any remit order. In order to assist submissions about that we have prepared a small bundle of documents comprising some six pages which should have been delivered to your Honours and it deals with the first, second and fourth of those topics. It is simply headed “Index”. May I go to the first topic, that is the question of apprehended bias, and - - -

GUMMOW ACJ: Well, these changes bring it clearly back to apprehended bias.

MR LINDSAY: That is right, and we have accepted the criticism for the way we formulated things and our intention is to confine ourselves to the case that we have presented. The second topic is dealt with at pages 4 and 5, and we build on the feature of the appellant’s claim in the New South Wales proceedings where it seeks to obtain and enforce a judgment against the respondents, independent of any taking of accounts between itself and Mr Emmott and without bringing any matters into account in favour of the respondents arising from the taking of accounts in London. In making that formulation we pick up the submissions that were made about Seton in our outline of argument.

GUMMOW ACJ: Now, is there a finding as to predominant purpose?

MR LINDSAY: There is no finding about that. It is a matter, in our submission, of inference from the formal documents. The appeal papers do not contain a copy of the notice of cross-appeal to the Court of Appeal, although it is summarised by Justice Lindgren in the second appeal book at page 1012. If the Court would be assisted by it, we have spare copies of the document which we can make available. Well, they are here. Mr Walker apprehends that I may be wrong about whether or not they are in the appeals books but we have copies that can be made available if they are not in the appeal books.

GUMMOW ACJ: Mr McGrath is on the ball.

MR LINDSAY: Mr McGrath is always on the ball. I stand corrected. The notice of cross-appeal is at page 841.

GUMMOW ACJ: Thank you.

MR LINDSAY: The net effect of the notice of cross-appeal is to seek to have an increase in the amount of the judgment awarded by the primary judge and also to overcome any monetary deficiency in his Honour’s orders arising from his blanket award of $4 million, but the relief that is sought by the appellant is for an increased money judgment without any allowance for the taking of accounts in respect of Mr Emmott or the arbitration. The third point that we - - -

GUMMOW ACJ: Just before you – looking at your outline, you refer in paragraph 1 to Walton v Gardiner and then paragraph 2 says:

the law does not allow) the Appellant to claim or recover from the Respondents as accessories to Mr Emmott (as principal wrongdoer) compensation independent of the taking of accounts between the Appellant and Mr Emmott and without bringing into account –

et cetera. That strikes me as a large proposition. Is there any authority in support of it?

MR LINDSAY: What we are relying on there would be the case references in Seton. We have referred to the main cases that are footnoted by Seton in our outline of argument and we would rely on the submissions.

GUMMOW ACJ: Seton was written before the development of this jurisdiction, was it not?

MR LINDSAY: I am sorry?

GUMMOW ACJ: Seton is written long before the modern cases about knowing assistance. Barnes v Addy was decided in the last quarter of the 19th century, then went to sleep for a while and it woke up in the 1950s or 60s. Is there any more modern authority on this point?

MR LINDSAY: I am not aware of it, and the way we formulated what we see as the same or an analogous approach appears in the written submissions that were annexed to our outline of argument.

CRENNAN J: Is not your point 2 really a much narrower one? Are you not relying on the election made by the plaintiffs in relation to seeking equitable compensation? Is that not what underpins this point so it is a much narrower point than the way it has been expressed there?

MR LINDSAY: Your Honour may well be right. I had not thought of it as so narrow, but your Honour may be right. The situation we have here is that in the New South Wales proceedings there was an express election. There appears to have been an imposition of an equivalent in the London arbitration giving rise to the question of compensation in each case, but all to be assessed against the background that there was to be a taking of accounts between the appellant and Mr Emmott as quasi partners and so we say that they need to take into account what happened with Mr Emmott. That is the context in which we put it.

HAYNE J: Two issues emerging from this paragraph 2. First, you said that the propositions of law are supported by passages in Seton. Can you be more specific? I must confess to you, Mr Lindsay, I had not read Seton as propounding the view that is recorded in paragraph 2.

MR LINDSAY: In our outline of argument of yesterday, paragraph 19, we refer to three cases, copies of which I think were made available to your Honours yesterday.

GUMMOW ACJ: Paragraph 19?

MR LINDSAY: Paragraph 19 of the respondent’s outline of argument.

GUMMOW ACJ: The short outline?

MR LINDSAY: The short outline.

HAYNE J: I think it may readily be accepted that by seeking account you submit to providing an account, but the proposition advanced in paragraph 2 of this last document is, I think, rather larger than that.

MR LINDSAY: The passage in Clarke v Tipping from 1842, to which we refer in the English Report version, is at page 470, the top two paragraphs.

GUMMOW ACJ: What was the dispute in Clarke v Tipping? It is a precursor of Barnes v Addy, is it not? This is generally understood.

MR LINDSAY: Yes, it is.

HAYNE J: .....taking of accounts between principal and agent, is it not?

MR LINDSAY: Yes, and each of the cases has that sort of flavour about it if it is not precisely that. The other references are pretty much to the same effect but they are talking about general practice. It is more that they have a statement of what the practice is rather than the particular cases. In Toulmin v Reid of 1851 in the English Report version - it is at page 380 in that first paragraph, the middle of that first paragraph “there are many cases”, et cetera, so it is talking about practice.

HAYNE J: The second aspect of your paragraph 2 is this, I think, Mr Lindsay. At all points up to the interim award rendered by the arbitrators, MWP has pursued its claim both in the arbitration and in the New South Wales court on an identical footing, has it not, namely that the Nicholls and Slater interests are bound to account, as is Mr Emmott – to account or to pay compensation for the Sokol transactions as well as those which the arbitrators ultimately found liability. Is that right?

MR LINDSAY: In substance, that is correct. There are some small variations but they do not affect the substance of what your Honour has put to me.

HAYNE J: Indeed, by its appeal is MWP seeking to – that is its appeal against the arbitral award, is MWP seeking to, if you like, continue its prosecution of the Sokol claims?

MR LINDSAY: I am not sure about that. I would have to check that.

HAYNE J: I would have thought it was. That was the point of its appeal that it was disappointed with the result because it did not get up on the Sokol claims. You see the point to which I am coming that at all times in both the arbitration and in the litigation MWP has pursued the same claims. In one Tribunal it was a little more disappointed than in others. What does that say, if anything, about your formulation of abuse?

MR LINDSAY: What they are seeking in two separate proceedings and types of proceedings is the one process of accounting, in a sense, because the assertion is, in broad terms, that there was a wrong done to the appellant in which Mr Emmott was said to be the principal and the respondents were said to be the accessories but it was in substance the one wrong. What the appellant is seeking to do is really to effect a double recovery.

It might, in Mr Walker’s submissions yesterday, disclaim that, but we see that the appellant still seeks to pursue its notice of cross-appeal and it seeks to obtain an absolute money judgment unconstrained by matters arising from the one taking into account. So it is attempting to split the proceedings without any recognition that they are the one and the same case essentially and we submit that is an abuse from which the respondent should be protected and the proceedings in New South Wales against the accessorily liable people, assuming that is what they are, is those proceedings are not designed to permit that. The appellant is seeking to split its case between two forums and we say that is not permissible. It leads to an abuse of the New South Wales proceedings because they are put on the basis it is said to be independent of the principal case.

GUMMOW ACJ: Your paragraph 3 comes to this, I think. You rely upon those matters (a) through to (d), as it were, manifesting the presence of the predominant purposes, is that right?

MR LINDSAY: That is right.

GUMMOW ACJ: This is really linked back into what you say was a splitting or bifurcation that was wilful rather than forced by circumstances upon your opponent.

MR LINDSAY: That is right. If there was an opportunity for the appellant to step forward and say, well, we accept that we must make allowances for what happens in London, that was the time for them to do it, and they did not, and they are not now. So that is how we put that aspect of the case. On the third topic, the question of the principle of satisfaction - - -

GUMMOW ACJ: Do you accept what Mr Walker accepted in the transcript at 2250 yesterday? Page 52, line 2250 and thereabouts, namely, that an equity against double satisfaction could attach to the statutory rights upon any registration under the foreign Arbitration Act.

MR LINDSAY: Yes.

GUMMOW ACJ: These matters you are you now talking about could be thrashed, if they ever had to be thrashed out, then and at the moment you are acting somewhat proleptically.

MR LINDSAY: We would submit not because there is another aspect to it and that is that the London arbitration might never be registered here, but we would nevertheless be exposed to the detriment of having a judgment against us and so we would be – with all the enforcement regime that would be called in aid. It may be that is where - - -

GUMMOW ACJ: What is the timeline you are postulating? The timeline is final resolution of the equity set in New South Wales?

MR LINDSAY: Yes.

GUMMOW ACJ: Subsequent resolution of the London arbitration?

MR LINDSAY: Yes.

GUMMOW ACJ: Attempted registration of the London award in New South Wales?

MR LINDSAY: It may not ever be registered here. So the problem that we have may arise without that process ever having been commenced and in the meantime, the appellant, for example, might studiously avoid coming to New South Wales with the litigation but seeking otherwise than to seek to enforce a money judgment against us and if there is a vice against which we need protection, it would be there, in our submission.

GUMMOW ACJ: Would they be put on terms in New South Wales as to any enforcement of their New South Wales judgment?

MR LINDSAY: We submitted that when we spoke of an undertaking in the submissions that were annexed to our outline of argument, but that approach was not addressed by the primary judge, but that may well be one way of dealing with it. An alternative way may be through the equitable principle of satisfaction to which we have had our attention drawn by the Court, including the reference to Baxter [2001] HCA 66; (2001) 205 CLR 635 including page 659.

GUMMOW ACJ: There is also a work by Mr Barnett, Res Judicata Estoppel and Foreign Judgments, which deals with these matters at pages 23 and 24, but I think you are sufficiently seized of the point.

MR LINDSAY: Equity would be looking to the substance, not the form and we would submit that the appellant having accepted the benefit the arbitration clause in his agreement with Mr Emmott and instituted arbitral proceedings against the principal wrongdoer and obtained a determination of rights between it and Mr Emmott together with an order for set-off, in our submission, it would be unconscientious for the appellant having gone through that process, committed itself to that process, to seek further recovery, perhaps double recovery or greater, from the respondents in respect of any accessorial liability and, in those circumstances, it would be open, in our submission, to the New South Wales Supreme Court to stay execution of any judgment or proceedings in the New South Wales Supreme Court in order to ensure that that unconscientious conduct did not occur. That, as we apprehend it, is the way the point would be put and we would seek to rely on it.

CRENNAN J: Well, if that suggests then that the present application in relation to abuse of process is premature do you have an answer to that, or what would you say about that?

MR LINDSAY: Well, insofar as the abuse argument is put, based on Walton v Gardiner, if we are correct about that the proceedings are being pursued for a purpose for which they are not intended so that would perhaps come first and cause the proceedings to be brought to an end.

GUMMOW ACJ: Yes, but you only get into Walton v Gardiner by reason of paragraphs (a) to (d) in your point 3, and that brings you back to what we have been debating with you.

MR LINDSAY: The matters that have to be decided ultimately do bring us back to those points, viewed from a number of different perspectives. I accept that. The fourth point that we would seek to address is the form of the remittal order, and in respect of that we do not pretend to any dogmatism as to the best way to deal with it. The approach that we have commended was one that made a general order leading to the Court of Appeal to give it operation, but accepting, as we think is the case, that the Court of Appeal intended to decide all or virtually all the questions of principle and steered clear of questions turning upon complaints about findings of fact or the absence of findings of fact.

As a matter of preference to the extent that that may be relevant, we would invite the Court to proceed in that fashion, but we would seek a short opportunity to respond to Mr Walker’s document if a different approach were adopted. Those are our submissions, otherwise we rely on our written submissions.

GUMMOW ACJ: Yes, thank you, Mr Lindsay. Yes, Mr Walker.

MR WALKER: May it please the Court. The Walton v Gardiner reformulation of the abuse of process argument of this morning needs to be considered in the context obviously of the way in which the matter was argued and, to the extent it was determined, the way in which it was determined in the Court of Appeal. Could I draw to your Honours’ attention in particular the way in which Justice Basten addressed the intersection between London and Sydney at pages 950 and following, paragraphs 96 to 108.

The key is the acceptance by his Honour that events that had not worked themselves out – picking up the matter of prematurity most recently raised by Justice Crennan with my learned friend – may affect things, see in particular on page 954, paragraphs 107 and 108. In particular, may I draw to attention in paragraph 108 just above line 40 the possibility left open by his Honour that my client:

suffered losses as a result of the conduct of –

Messrs Nicholls, Slater, Temujin –

otherwise than as a result of accessorial liability for the misconduct of Mr Emmott.

And lest this has been overlooked, may I remind your Honours of what we put in the last sentence of the one - - -

GUMMOW ACJ: Just what is being said there? What is being postulated, Mr Walker?

MR WALKER: There were claims which succeeded at first instance, not for accessorial liability but for their breaches of their own duties directly. This is referred to in the - - -

GUMMOW ACJ: Themselves as fiduciaries?

MR WALKER: Themselves, yes. You will find that noted as to the declarations, leaving aside the appropriateness of having declarations of this kind, as Justice Young discussed, but it is marked - the culmination of the trial in this regard is marked by the declarations you see for each of Messrs Nicholls and Slater at pages 812 and then 814 and 815 for the two men respectively. The first two declarations in their cases – 812, the first two declarations and then 814 and 815, the first two declarations for each of the men refer to - - -

GUMMOW ACJ: Declarations 1 and 2?

MR WALKER: Yes. They are direct personal breaches, not accessorial in any regard. That is what is being referred to in paragraph 108 by Justice Basten. Justice Young, on our reading - - -

GUMMOW ACJ: Just a minute. In the Court of Appeal is the correctness of those two orders, for example, against Mr Nicholls in play? Is that disputed?

MR WALKER: Yes, they are disputed but they are issues not determined - - -

GUMMOW ACJ: Would they have to be determined if the matter went back?

MR WALKER: Yes.

GUMMOW ACJ: So, the dispute as to declarations 1 and 2 is amongst the grounds of appeal on your list? The same applies for Mr Slater?

MR WALKER: Yes. I should say the differences between my friend and me in relation to an order of remitter may not be very great in one sense. They are, however, very large in this sense that we, with respect, particularly having considered what was raised with me yesterday by your Honours, we would certainly urge that the order should be categorical, definitive, about what is back to the Court of Appeal and that should be done by reference, so to speak, to the pleadings, that is the notice of appeal and the notice of cross-appeal, which is what we have tried to do in our documents.

GUMMOW ACJ: Yes.

MR WALKER: Now, there is another aspect raised by Justice Basten in paragraph 108 on page 954 - - -

GUMMOW ACJ: But the third defendant, understandably, I suppose, is purely Barnes v Addy, is it not, and the fourth and the fifth - - -

MR WALKER: Temujin, of course, is the vehicle for the diversion rather than the diverter.

GUMMOW ACJ: Yes, thank you.

MR WALKER: Paragraph 108 also has at about line 40 the sentence starting with the word “Further”, a reference to the question of satisfaction. It very much picks up what Justice Crennan raised with my learned friend. The question whether there has been satisfaction will include even, perhaps, especially on our learned friend’s view of the account to be taken in London, it will arise even on their view of the case because of the approach to the account which is said to be directed to providing compensation for my client for liability owed by Mr Emmott.

So on any view of it that lies in the future and that is what is being referred to in paragraph 108 by Justice Basten. Could I note that Justice Young does not seem to deal with that aspect of the matter, but that Justice Lindgren agreed with Justice Basten in his paragraph 369 at page 1029 and if one goes further in Justice Lindgren’s reasons to page 1038, there is, as it were, repeated or extended agreement in relation to what is called the set-off point.

HAYNE J: What paragraph?

MR WALKER: Paragraph 403. Justice Lindgren refers to the matters I have noted in paragraphs 107 and 108 as “the set-off point”, and specifically agrees with that in paragraph 403.

HAYNE J: May I just understand better than I do what this set-off point is at 107?

MR WALKER: The set-off is referred to at line 20 in paragraph 107:

That depended upon the conclusion of the arbitrators that amounts due by Mr Emmott to the respondent should be set off against debts due from the respondent to Mr Emmott. To the extent that the claims against the appellants related to the same loss as might be recovered from Mr Emmott, and to the extent to which his liability had been extinguished by the relevant set-offs, it was contended that –

et cetera, and then - - -

HAYNE J: I just do not understand what is being there said.

MR WALKER: Your Honour, I confess I do not claim to be able to fully explain it, but his Honour, in that language of that sentence and in the next paragraph, seems to be looking forward to some working out yet to occur in - - -

HAYNE J: Undoubtedly that, but what is the contention, the contention that the respondent suffers no loss, that is MWP suffers no loss because - why?

MR WALKER: Your Honour, I am not sure. I think the reasoning goes something like this, because – no I am not sure. If it was different; if it was reversed I can understand it. If a debt owed by my client was reduced by reason of a liability suffered by Mr Emmott, sorry, your Honour, no.

HAYNE J: But what does it matter whether the liability is satisfied by payment of a cheque in satisfaction or setting-off of some other obligation, the liability is the liability.

MR WALKER: Yes, your Honour. So it is the answer to your Honour’s question about the set-off point. It seems, however, to link up with what my learned friends are putting this morning. The notion is that there is an abuse of process Walton v Gardiner style because, see paragraph 2 of today’s document page 4, there is an intention not to bring into account in favour of the respondents profits or property by set-off or otherwise for which the appellant is or might be obliged to account to Mr Emmott.

We know from the terms of the accounting directed by the arbitrators that it is, as I said yesterday, this is not just an account of profits from a nefarious venture, this is a full accounting between people to be treated as partners and so it includes the crossing, as it were, of money, the current account of Mr Emmott with the firm. It includes his one-third value as quasi partner.

How either of those, his current account or his one-third share as partner, could possibly have anything to do with the liabilities of Messrs Nicholls and Slater and Temujin, and why what happens in London under those rubrics should in any way diminish the liability they would have is completely unexplained and seems entirely contrary to principle. But paragraph 2 of today’s documents certainly simply says that.

GUMMOW ACJ: Well, there is something of an ambiguity in paragraph 2. It says “to claim or recover”.

MR WALKER: Yes. Now, that picks up the double satisfaction point – my concession remains unqualified. Dr Barnett’s book, to which Justice Gummow referred, has at 145, just as a matter of convenience, a reference to the equity operating. There is, in our submission, no difficulty whatever if, as is quite likely, nothing is ever brought to Australia by way of enforcement of a judgment against Mr Emmott and an award against Mr Emmott. Who knows in what jurisdiction the award will need to be enforced. It should not be assumed that it will ever be an Australian one, but being a foreign award it will certainly lend itself to the equity in the manner we have conceded.

GUMMOW ACJ: How would that work out if there is never any attempt to register in New South Wales?

MR WALKER: Your Honour, it will be because - - -

CRENNAN J: There are freezing orders in New South Wales, are there not?

MR WALKER: Yes. They presumably will expire either at or in accordance with the timetable for enforcement of any net figure found to be payable by Mr Emmott. We still do not know whether there will be a net figure, of course. All this lies in the future.

HAYNE J: But Nicholls and Slater interests are subject to freezing orders too, are they not?

MR WALKER: Yes, they are. Quite.

HAYNE J: And when will those expire?

MR WALKER: Well, I do not know, your Honour. At the moment the regime contemplates further trial, of course, and it will be for those involved in a further trial or a further appeal to attend to the circumstances as they then obtain as to what equity or what right, I should say, what interest justifies the maintenance of those orders after, for example, judgment has been entered, if judgment is entered.

GUMMOW ACJ: And what continued asset preservation order might be necessary - - -

MR WALKER: Quite, in aid of enforcement.

GUMMOW ACJ: - - - to provide the material upon which the doctrines could then operate.

MR WALKER: Quite so. That again is an assessment that needs to be made in light of circumstances not yet obtaining. So I cannot say when they will expire. It may be they will be replaced. It may be they will not expire until judgment or by agreement.

HAYNE J: In that process, your client would be the moving party, would it not?

MR WALKER: Yes, I think so.

HAYNE J: And be presumably bound, effectively bound – whether legally bound, but effectively bound – to make full disclosure of how much, if anything, it had got back out of the Emmott interests.

MR WALKER: I would imagine and hope so. Yes, your Honours. There is also, obviously, the fact that discretions will be involved and conditions may be imposed.

GUMMOW ACJ: As to your client pursuing satisfaction elsewhere?

MR WALKER: Quite.

GUMMOW ACJ: Of any award against Australia?

MR WALKER: Quite. Contrary to the suggestion made quite plainly this morning, we do not have an interest in – I do not have a brief to push double recovery, excess recovery. No, we cannot. There are ways – Justice Hayne has raised a number of them – in which that can be ensured. All this lies in the future.

Now, your Honours, we have prepared – and I had given my friend yesterday a document which I think now does become of some assistance. I do not need to speak to it. It is intended to lay out in tabular form a relation of claims – this is relevant claims with respect to lost clients, lost profits – compared as between the arbitration and the Supreme Court.

Now, it is precisely, and with great respect as my learned friend put it this morning in general terms in answer to a question from Justice Hayne about whether in effect the same venture was being pursued in the claims in London and in Sydney and my learned friend said well generally, yes, there are small variations. I do not want to quibble about the epithet “small”, there are variations, but you can see that there is considerable overlap as well as differences.

It means that in order to know whether recovery from Mr Emmott, for example, amounts to satisfaction of a liability found against Messrs Nicholls and Slater, there will need to be an understanding of what it is by way of the claims in question have been allowed in the accounting between my client and Mr Emmott on the one hand and what it is that constitutes the measure of compensation necessary to meet the liability of Messrs Nicholls, Slater and Temujin.

The comparison, as the members of the Court of Appeal or at least Justices Basten and Lindgren appreciated, would require knowledge of that which has not yet happened and that, in our submission, is why a broad brush or a priori contention advanced by the respondents in this Court to the effect that what we were trying to do in New South Wales was outside the legitimate scope of litigious aims for New South Wales proceedings is simply out of court.

It is an impossible proposition to maintain that one should not sue people not only for so-called accessorial law at liability, that is, their direct personal liability under the second limb of Barnes v Addy – accessorial does not really help the analysis – plus their own direct liability, plus the fact that it is for a different or overlapping suite of depredations compared with that which is advanced in London. They are, after all, three different players in the six months or so of concerted deliberate attempts to take my client’s business from it.

It is for those reasons, in our submission, that calling in aid both the prematurity notion and the need for precision of identification of overlapped claims, all of those are necessary in order that one could say there is a threat of double satisfaction, excess satisfaction. That in turn can be dealt with by the method adopted either in New South Wales enforcing against Nicholls and Slater, or in any other proceeding in which, say in England, obviously, satisfaction by Nicholls and Slater can be called in aid with respect to enforcement against Mr Emmott.

Coupled with the tool between the malefactors, that is, contribution, in our submission there is no cause for concern about what I will call oil and water mixture of London and Sydney. It is not oil and water mixture. They are overlapping claims with necessary differences because they are different players involved, certainly involving many, many of exactly the same events, but with different players playing roles in those events, leading to the assessment in London of compensation by an account which is no simple account of profits. It is not that. It is an accounting between partners devised in order to provide what the arbitrators call compensation, true with the major inconsistency between London and Sydney of what I call “would Sokol have stayed”.

Now, that, in our submission, is a product of the fact - and I do not want to repeat what I said in-chief but to respond to my learned friend this morning, that is a product of the fact that the arbitration agreement with the rights it gave Mr Emmett to resist being dragged into New South Wales, that is what it stems from and, in our submission, for the reasons we have already put that would never be regarded as an abuse of New South Wales process.

GUMMOW ACJ: On this question of contribution, can I ask you firstly, did the award, the monetary award made by Justice Einstein, differentiate in respect of Mr Nicholls and Mr Slater, their immediate liability, if I can put it that way from their Barnes v Addy liability?

MR WALKER: No. I should not go further, it does not.

HEYDON J: It cannot be disentangled by recourse to his reasons for judgment.

MR WALKER: We think not. That is against me on the measure of damages point to which reference has already been made. That does not mean that the material was not available by which there could be disentangling but Justice Heydon’s question is can one do it in the reasons of Justice Einstein and the answer is no.

GUMMOW ACJ: His contribution is between Mr Emmott and the second member of Barnes v Addy malefactors may be one thing. Contribution as between Mr Emmott and the Slater and Nicholls’ interests in respect of their direct liability may be another.

MR WALKER: That would never be a concern to us, with respect. They can work that out and to the extent that the equities adjust things, so be it. That does not touch us in relation to excess recovery. They will each, at the times and if ever the occasion arises, they will each have the capacity to ensure that does not happen. That is why, to use my learned friend’s expression this morning, it is not the case that we, as it were, abusively seek to forge ahead, making no allowance for what happens in London. That is not the case.

GUMMOW ACJ: I think we would be assisted, looking more deeply into paragraph 2, by some written submissions on what seems to be a proposition of law that in a Barnes v Addy second limb situation the plaintiff cannot recover under the second limb without also seeking to recover from the principal fiduciary. You see it says the law does not allow – I am not sure what is wrapped up in that. Certainly, they are all proper parties, I would imagine. That is one question. That is not necessarily this question. The amounts could be different, could they? I just do not know.

MR WALKER: First, they can be different because obviously if set-offs or cross-claims; this is one of those. He gets allowance for his one-third partner interest of the matter of property that survived his wrongdoing. The notion that the accessorial, to use a word that, with respect, does not help but it is a handy label in this argument, the notion that those liable so-called as accessories, get the benefit of his property so that his property’s value gets counted against us, as it were, twice, thrice, four times, is, with respect, wholly without principle. It answers to no equitable instinct at all. That is the first point.

The next point is this. Perhaps a classic case for a plaintiff to be astute to pursue someone under the second limb of Barnes v Addy is that the, I will call it principal fiduciary, has disappeared or is insolvent. That, far from being a refuge for the solvent defendants, who say, “Well, yes, I knowingly assisted, but you are not going to get anything from him, so you are not going to get anything from me”. That is absurd; it does not need any time to dispose of that. It also follows from similar consideration that it cannot be that you are obliged to sue the principal. It may be that if there is a principal with money that for some reason has not been sued - - -

GUMMOW ACJ: It may still be a necessary part, the proper party, may it not?

MR WALKER: Your Honour, yes, you anticipated a matter I wanted to - - -

GUMMOW ACJ: In aid of quelling the whole controversy, as it were.

MR WALKER: It may be that either by way of claim - - -

GUMMOW ACJ: The liquidator says “I am not interested” and disappears.

MR WALKER: It may be that by way of claim over or cross-claim by the defendants, or by a necessary and proper party argument, particular bearing in mind that at the heart of the case under the second limb will be the breach by the principal so-called, that is, it must be proved, it may well be that in any event, that person will be brought to court. But, in our submission, it does not follow that everything which may obtain as between the plaintiff and the principal defaulter redounds financially to the benefit of the plaintiff and the so-called accessorial defaulters, and this case provides a very straightforward example, as I say, with the current account and the partnership interests in that regard.

In our submission, paragraph 2 of today’s document on page 4 goes further than either principal authority would suggest appropriate. It certainly goes into territory which would undeservedly provide to so-called accessories, presumably because of some content to be given to that figurative language that they tuck in behind, take all the benefits of the principal.

Now, there is no warrant for that at all. It is, we submit, a freestanding independent personal liability which is to be suffered by and imposed on a person guilty of the conduct that attracts the second limb in Barnes v Addy. True it is that claim requires, as one of the probanda, that there is a, if you like, so-called principal, that is a fiduciary who has been knowingly assisted in that fiduciary’s breach. But that in no way renders the cause of action subsidiary in the sense that there can be no greater remedy against the accessory than against the principal, who may have claims against the plaintiff of a kind personal to the principal and obviously not available to the accessory. That leads me to the last comment in relation to the language of some of the argument against us. It is not the case - - -

GUMMOW ACJ: Just before you do that, looking again at this morning’s formulation what do you say as to the existence, in this case, of a predominant purpose by reference to (a) to (d) in paragraph 3?

MR WALKER: There is no finding of a - - -

GUMMOW ACJ: Or to put it more accurately the offensiveness of (a) to (d), as providing a predominant purpose, as being capable of providing a predominant purpose?

MR WALKER: The passages I referred to earlier which start in Justice Basten’s reasons at paragraph 96 include statements of the propriety of maintaining claims directly, not under the second limb of Barnes v Addy necessarily only, but also directly for their own breaches of duty. There is no other finding which comes close to accepting arguments of this kind about predominant purpose being a nefarious one.

Indeed, it is obvious from the documents that my learned friend confesses this morning is all he has on purpose – that is, look at the papers, he says - it is obvious that the claim being made, the purpose of the claim, is to obtain compensation for alleged wrongs, wrongs which were held to have been committed dishonestly, both by Mr Emmott and by Mr Nicholls and by Mr Slater. There is no doubt about the wrongdoing and for those reasons there is no doubt about what I will call liability.

It is not that Mr Nicholls was not held liable. It was simply that he was held to have caused losses only of a certain extent. His liability is undoubted. The losses he was adjudged liable to compensate for by the mode of general accounting did not include all of those upon which Messrs Nicholls and Slater both directly and under so-called accessorial responsibility were held liable for in Sydney. But there was liability consistently.

Your Honour, it is for those reasons, in our submission, that if a Walton v Gardiner argument is appropriate to be deployed at this stage at all, then one thing to be said is that it cannot succeed because there is no finding made beforehand or available in this Court as to a nefarious predominant purpose. There is nothing nefarious about seeking to obtain from all wrongdoers in question remedies which will permit overall full compensation. May it please the Court.

HEYDON J: You are rejecting the Acting Chief Justice’s suggestion that you should put in written submissions about paragraph 2, are you?

MR WALKER: No, not at all.

GUMMOW ACJ: You have leave to put in within 14 days any further submissions in writing as to paragraph 2 and, in particular, the statement “the law does not allow” that is found in paragraph 2.

MR WALKER: Thank you. I am sorry. I did not intend to say anything rejecting that - - -

GUMMOW ACJ: No, no. It is all right. Mr Lindsay, two matters. Firstly, it seems to us that the content of any resumed appeal, put it that way, in the Court of Appeal should be spelled out. So the specification that is provided in what Mr Walker handed up seems to us the preferred way to approach the matter. You could have 14 days in which you can carefully review this and if there are any additions you want to make to it, put that to us having first put it to your opponent. The other matter is, do you have any – perhaps we should have asked you this – looking at paragraph 107 of the Court of Appeal reasons, this rather vexing reference to set-offs, anything you want to say about that?

MR LINDSAY: One needs to understand what the big competing pictures were in the London arbitration to put that in context because that gets back to the London arbitration. The appellant, that is MWP, was seeking to protect its interest in shares in Steppe Cement and it was doing that in part by suggesting that Mr Emmott held on trust for the quasi partnership shares that were found ultimately to be due – owned beneficially by Mr Sinclair and by alleging breaches of fiduciary duty. That is the background.

The breaches of fiduciary duty that were alleged against Mr Emmott concerned three classes. One class related to companies associated with Mr Schoonbrood, another class related to companies associated with Mr Sinclair and then there were two other clients, the “rats and mice”, if I might use that expression as it was used yesterday, and they were Kangamuit and the Lancaster Group. On the findings made by the arbitrators, there was no liability in Mr Emmott associated with the companies of Schoonbrood and Sinclair, but there was, the arbitrators found, a liability in respect of Kangamuit Seafoods and the Lancaster Group. They are relatively small amounts.

It is likely, one might say, as a matter of practical expectation that those amounts will be extinguished in any set-off that occurs between the appellant and Mr Emmott. If that is the case, and if it is also the case that the only relief that might be sought against the respondents in these proceedings relates to Kangamuit and the Lancaster Group, any entitlement that the appellant might have in respect to those will have been set-off; it would cease to exist. That is the structural background to the comment, I think.

GUMMOW ACJ: Thank you. Anything you want to say as to that, Mr Walker?

MR WALKER: No, your Honour.

GUMMOW ACJ: Very well. Right, so that we are clear as to what has to be done then, within 14 days Mr Lindsay’s side will provide any proposed revision to the document handed up this morning by Mr Walker headed “Orders Sought by the Appellant”, having first consulted with your opponent, so hopefully there could be some consensus.

Secondly, in respect to paragraph 2 of the document handed up this morning by Mr Lindsay under the heading “Respondents’ Formulation of Abuse of Process other than Reichel v Macgrath”, Mr Walker has leave to provide within 14 days any written submissions on that paragraph and you have seven days thereafter to provide a new reply.

MR LINDSAY: May it please the Court.

MR WALKER: May it please the Court.

GUMMOW ACJ: All right. We will reserve our decision and we will adjourn until 12 noon.

AT 11.24 PM THE MATTER WAS ADJOURNED